Global Economics

Revolutionizing Urban Transport

British startup Ultra Motor is bringing its two-wheel light electric vehicle to the U.S. With cities crowded and oil prices high, the time is right

Back in the Cold War 1970s, a Russian radio transmission specialist stationed in East Germany dreamed up a new, more efficient electric motor that could produce 35% more torque for the same amount of power. Vasily Shkondin's idea could have remained in obscurity behind the Iron Curtain, but today it's the centerpiece of a bold bid to reshape urban transport.

It has taken decades of refinement, millions in venture capital, and the audacious vision of a 31-year-old U.S. chief executive, but Shkondin's motor is going global. A six-year-old British startup called Ultra Motor is using the patented Shkondin design to power a range of affordable, nonpolluting electric scooters known as "light electric vehicles," or LEVs.

The company already has sold more than 25,000 units in India, racking up $20 million in revenues during its first full year of operations. Now, Ultra Motor is set to roll out a more luxurious version in the U.S. this summer, followed by European models later in the year.

The Dawn of the Personal Mobility Vehicle

Ultra Motor may be hitting a sweet spot. All over the world, concerns over pollution, traffic congestion, and energy costs are prompting consumers, companies, and governments to embrace cleaner, cheaper, and smaller vehicles, including electric or hybrid-electric cars and two-wheeled electric vehicles.

"2007 is when the world officially recognized that the adverse affects of climate change are real and here to stay," says Ultra Motor's globe-trotting Chief Executive Officer, Joe Bowman, who is based in Moscow. That awareness—coupled with soaring gas prices—has brought about "the dawn of a new personal mobility era," Bowman says, "We are seizing the opportunity."

Ultra Motor is already remarkably global for a small company. Headquartered in St. Edmunds, England, and employing 180 people in eight countries, it does research and development in Shkondin's current home of Pushchino, a former Soviet "secret" city 75 miles south of Moscow that didn't even appear on maps until 1991. A well-known German LEV designer named Norbert Haller handles industrial design. Product development takes place in Taiwan, while the motors are made in China and the vehicles are assembled in India and Taiwan. So far, Ultra Motor has scored $25 million from Russian and European investors and is currently raising a $40 million private equity round.

Finally Filling a Real Need

In India, Ultra Motor has a 50-50 joint venture with the Hero Group, one of the world's largest manufacturers of two-wheeled vehicles. During their first year of operation, the partners opened 165 retail franchise stores across India, with plans to open a total of 700 stores over the next three years. The Ultra Motor models in India, which are marketed locally under the model names Maxi and Velociti, sell for $750 to $900.

To position itself for entry into the U.S. market, Ultra Motor acquired Los Angeles' AECF for an undisclosed sum in September, 2007. AECF was founded by electric-vehicle pioneer Ed Benjamin, and Mike Fritz, the former chief engineer for Lee Iacocca at EV Global Motors, the venture Iacocca formed when he left Chrysler in the mid-1990s.

"Lee Iacocca and many others with good technologies and good vision went at it at the wrong time," says Bowman, noting that oil sold for just $12 a barrel when EV Global was launched in the U.S., making electric vehicles a "nice to have" rather than a necessity. "The primary economic driver of the market has really only come about in the last three years," he says. "So everybody who came before, no matter how good or famous, was going to fail."

A More Efficient Motor

Ultra Motor is betting that with oil now exceeding $100 a barrel, Americans may finally start embracing more eco-friendly forms of transport. For example, New York City Transportation Dept. planners have been consulting with Danish urban designer Jan Gehl on a plan for the city's first-ever physically separated bike lane in Manhattan. Unlike the typical on-street bike lane where cyclists mix with motor vehicle traffic, this new design will create an exclusive path for bicycles—and, Ultra Motors hopes, two-wheel LEVs.

The British company's vehicles are an eco-friendly cross between a bike and a motorcycle. By providing one-third more force than conventional electric motors in similar power ranges, Ultra Motor models can accelerate faster in heavy traffic conditions and climb steeper hills. Another key benefit is that the battery packs are up to 10% more efficient, meaning they need to be recharged less frequently. And the motors use very few components and moving parts, making them cheaper to manufacture and easy to service.

Ultra Motor's products are proving popular in India with commuters looking to offset the adverse effects of gas prices on their disposable incomes. They're also a hit with teenagers under the age of 18 who can't legally ride motorcycles or gas-powered scooters and so must use pedal bikes or take the bus, says Bowman. Ultra Motor figures it can sell about a half-million units in India alone over the next two to three years—and potentially more than five times that number if the Indian government imposes disincentives to buying gas-powered vehicles.

Lithium Ion Batteries for the U.S.

Ultra Motor's U.S. model, known as the A2B, will be quite different from the Indian ones. The biggest change is the battery: Indian models use cheaper but clunkier lead-acid batteries, whereas the A2B will use smaller, lighter, lithium ion batteries. That will allow the battery to be integrated into the frame, making for a sleeker design. The removable battery, about the size of a box of facial tissues, can be charged from a normal electric outlet, just like a mobile phone.

Made of lightweight aluminum and sold through specialty retailers in the U.S., the A2B can run at speeds up to 20 mph and go up to 44 miles on a single charge. It will carry a price tag of $2,200, less than the typical cost of a Vespa scooter but significantly more than the Currie E-Zip Comfort Electric Bike, which sells for just over $300 at Wal-Mart (WMT). Bowman thinks customers will pay a premium for Ultra Motor's lighter, sleeker, longer-range design.

U.S. Market Is More Interesting

Who are these customers? Ultra Motor is targeting a select group of buyers in the U.S.: College students looking for eco-friendly campus transit; urban dwellers who rarely venture out of a 20-mile zone; and suburban commuters who might otherwise ride a bike or drive a car to their local train station.

Why launch in the U.S. before Europe, when the Old World is going green faster? "The U.S. market is more interesting right now because there is significantly less competition and it's more homogenous," Bowman says. "It is a greenfield opportunity." While he concedes Ultra Motor LEVs won't likely be bought by "farmers in Nebraska," Bowman says the company's market research reveals millions of people living in U.S. cities "who have never been exposed to this idea."

For more on the urban-transport revolution, see the BusinessWeek.com slide show.